Italy heads to new elections as caretaker PM named

Italy's president on Monday named a former IMF economist as caretaker prime minister to lead the country into new elections, possibly as soon as the autumn, after a political storm whipped up by the collapse of a populist bid for government.

The eurozone's third largest economy lurched into a fresh crisis on Sunday when President Sergio Mattarella vetoed the nomination of fierce eurosceptic Paolo Savona as economy minister in a planned coalition of the far-right League party and anti-establishment Five Star Movement.

The parties' approved nominee for prime minister, lawyer and political novice Giuseppe Conte, stepped aside following the decision to reject Savona, crashing the proposed government after nearly three months of convoluted horse-trading.

The subsequent nomination of Carlo Cottarelli as caretaker prime minister sparked angry calls for Mattarella's impeachment as Savona had the backing of the majority of lawmakers.

League leader Matteo Salvini, a fellow eurosceptic who was Savona's biggest advocate, said the anti-establishment government failed because the "powers-that-be, the markets, Berlin and Paris" had decided against "some of our ministers".

Five Star chief Luigi Di Maio called on party supporters to attend a rally in Rome on June 2, the anniversary of Italy's transformation into a republic, after what he called "Italian democracy's darkest night".

The chaos -- the latest chapter in a drawn-out political saga after an inconclusive March election -- sent Italian stocks tumbling by over two percent, and bond yields surging, with Italy's debt risk premium hitting its highest level since November 2013.

Elections 'after August'

Cottarelli, 64, was director of the IMF's fiscal affairs department from 2008 to 2013 and became known as "Mr Scissors" for making cuts to public spending in Italy.

He said that should his technocrat government win parliamentary approval, it would stay in place until elections at the "start of 2019".

But if parliament fails to approve his government, a new election would be held "after August" -- the most likely outcome given Five Star and the League have a parliamentary majority. Only the centre-left Democratic party has announced that it would vote in favour.

Salvini and Di Maio furiously denounced the presidential veto, blasting what they called meddling by Germany, debt ratings agencies, financial lobbies and even lies from Mattarella's staff.

"I say it again today -- we don't want to leave the euro... Paolo Savona would not have taken us out of the euro. It's a lie invented by Mattarella's advisors," said Di Maio in a live video on Facebook.

"The truth is that they don't want us in government."

Elections could benefit Salvini, however, as polling carried out recently by IndexResearch put the League at 22 percent, five points up from their vote share in March's inconclusive general election.

"Opinion polls seem to indicate that the League has a favourable political momentum," Nicolas Veron, an analyst at the Bruegel Institute in Brussels, told AFP.

Impeachment 'almost certain'

According to the Italian constitution, the president nominates both the prime minister and, following proposals from the premier, the cabinet.

The most famous example of a president denying a PM's choice came in 1994 when Eugenio Scalfari refused then prime minister Silvio Berlusconi's choice of his own lawyer -- Cesare Previti -- as justice minister.

However, Di Maio said that Mattarella had "gone beyond his legal prerogatives" and said that with the backing of the League it would be "almost a certainty" that Mattarella faces an impeachment trial.

Most analysts however say the move has little chance of success as impeachment is only possible in cases of "high treason" or constitutional breaches.

"President Mattarella has only exercised his constitutional powers", said Massimo Luciani, president of the Italian Constitutionalists Association.

German 'cage'

Former constitutional court judge Mattarella said he had accepted every proposed minister except Savona, who has called the euro a "German cage" and has said that Italy needs a plan to leave the single currency "if necessary".

The 76-year-old said he had done "everything possible" to aid the formation of a government, but that an openly eurosceptic economy minister ran against the parties' joint promise to simply "change Europe for the better from an Italian point of view".

French far-right leader Marine Le Pen joined in the outrage of the Italian populists, accusing the president of a "coup d'etat", while leading Brexit campaigner Nigel Farage said that it was "time for more elections and bigger votes".

But French President Emmanuel Macron backed Mattarella, saying he saying he was fulfilling his role as the guarantor of the country's institutions with "courage and responsibility".

Germany was more cautious, with Chancellor Angela Merkel's spokesman saying: "Respect for Italian democracy and democratic institutions requires us to wait and see which government will lead the country and which ideas it will present to its EU partners".

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